Speech by the Deputy Prime Minister, Leader of the National Party, Minister for Trade The Hon. Tim Fischer MP to the Australian Institute of Company Directors

BUILDING EXPORTS AND JOBS

Melbourne, 11 June 1997

(Check Against Delivery)

Introduction

Thank you Elizabeth Alexander.

Ladies and gentlemen, one of the Government's fundamental foreign and trade policy objectives is to improve the economic well-being of all Australians.

Achieving that objective depends on how well Australia competes in the regional and global marketplace, and how outward-looking and flexible our economy is.

In short, to make its way in the world - now and in the future - Australia must trade, and trade well. The more we build our capacity to export, the more the job situation at home will improve.

The Government is therefore pursuing vigorously its export strategy on two fronts: creating a competitive framework for Australian business, and freeing up further our international trading environment.

It is particularly timely that I address you today on this subject as my Department is currently running high-level business roundtables which are examining the links between trade liberalisation, exports and jobs.

I'd like to talk to you, first, about the benefits of trade liberalisation, and, second, outline for you the Government's export strategy which is maximising Australia's gains in international markets.

Trade Liberalisation, Exports and Jobs

Trade liberalisation, and its contribution to export growth, means jobs for Australians.

This is a fact, I think, that has not received wide enough recognition. At a time of high unemployment we have tended to attribute ongoing job losses to increased pressure from foreign competition.

A recent OECD study on trade liberalisation's impact on employment concluded, however, that trade liberalisation had a positive effect on demand for both skilled and unskilled labour.

As has been the case throughout the industrialised world, the recent disappearance of large numbers of mostly unskilled jobs in Australia has been due in the main to the rapidity of technological change, structural adjustment and productivity improvements.

Without rapid export growth over the same period, made possible by freed up international trade, there is no doubt that unemployment rates would have been even higher in Australia. Rates have certainly been much higher in many European countries - some as high as 20 per cent - during a prolonged period of major economic change for most industrialised countries.

The main way in which exports create jobs is by increasing the rate of economic growth. Over the last five years, growth in exports of goods and services averaged 7.5 per cent, compared to average economic growth of 3.6 per cent.

As a result, we are seeing exports grow steadily as a share of GDP. Over the last decade, exports as a share of GDP have grown from around 16 per cent to 20 per cent.

I am nevertheless very conscious of the fact that there is a perception that trade liberalisation threatens Australian business.

Therefore, my Department has recently undertaken a major study of the impact of trade liberalisation both here and abroad. This has found that gains from liberalisation over the last ten years amount to around 1.5 per cent of GDP, or around $1,000 per Australian family per year.

It indicates, perhaps most importantly, that despite the increased pressures trade liberalisation has brought, many businesses are very pleased with its impact.

The experience of the 70 companies interviewed has generally been positive, although there are clearly winners and losers in the economy-wide transformation under way. Four key benefits cited were:

. First, reductions in the cost of inputs and more cost-effective access to leading technology helped firms become competitive exporters.

. Second, tariff reductions in Australia over the years drove improvements in productivity and competitiveness.

- Managers, particularly in the manufacturing sector, found that after a decade of restructuring, if a firm was competitive in the domestic market then it could compete globally.

. Third, containment of competitor countries' subsidies and export assistance had helped Australian exports, particularly in agriculture and the processed food industry.

. Fourth, many firms not previously associated with exports had outgrown their domestic markets, lifted productivity and had become competitive in world markets.

My Department's study also found that maintaining and increasing jobs in many sectors and regions depended heavily on export growth. There was ample evidence that liberalisation had generated dynamic efficiency gains in a number of sectors.

In the food processing industry, especially the dairy foods industry, export growth following restructuring has contributed to strong employment growth in the Goulburn-Ovens-Murray Region in northern Victoria. Unemployment has fallen from over 12 per cent in 1992 to less than 7 per cent.

Export oriented information technology and telecommunications companies also generally had robust or growing employment and rising productivity.

Perhaps the most gratifying result of our survey was that business on the whole increasingly sees itself as truly 'international' rather than just as exporters. For many firms, growth opportunities are most likely to come from growing networks, collaboration and investment in overseas markets. There is no desire to return to a 'Fortress Australia' mentality.

A Strategy to Build Exports and Jobs ...

It is no surprise, given Australian business's generally positive approach to a rapidly changing operating environment, that exports continue to perform very well. Exports of goods and services were up 6 per cent in real terms in the year to March 1997. We can, however, still do more.

There are, of course, different views about the optimal pace of change and the strategies which will best achieve our objective of building exports and jobs. I would now like to outline for you how the Government is pursuing this objective in our domestic and international trade policies.

At home ...

This Government is committed to creating a competitive business environment to attract further investment from Australian and international firms and we have already made considerable progress.

Since coming to office, fiscal consolidation has made possible the lowest commercial interest rates in decades. Changes to the regulatory environment for small business and industrial relations reform have also assisted business.

The economic outlook is for strong growth, low inflation and faster employment growth. Real GDP growth is forecast to accelerate to 3_ per cent in 1997-98, from an estimated 3_ per cent in 1996/97.

Notwithstanding these favourable prospects, the Government needs to press ahead with reforms to improve further our competitiveness.

Our wide-ranging microeconomic reform agenda therefore includes the transport, telecommunications, and energy sectors, further labour market reform and responding to the Wallis Committee report's recommendations on the financial sector.

I do not intend to speak substantively on the issue of tax reform this evening. However, I would make the observation that the current system of indirect taxes in Australia reduces the competitiveness of exporters and, in any review of the taxation system, this is one of the range of issues that would need to be considered.

You will all be aware that further microeconomic reform will not be easy. The reform process, while delivering net gains, also involves winners and losers. Careful thought therefore needs to be given to how we can maximise the gains while minimising the adjustment costs. The recent decision by the Government on assistance to the automotive industry reflects this balance.

But to avoid losing investment, production and jobs to other regional locations, we need to be ahead of the competition as we move to more open markets.

... and Internationally

The other key strand to our export and jobs strategy is, of course, ensuring that our now increasingly competitive goods and services gain fair access to overseas markets.

In February this year I set out, in my Trade Outcomes and Objectives Statement to Parliament, a detailed strategy for further improving trade performance this year.

Our integrated trade strategy places renewed emphasis on bilateral market access issues in addition to ongoing discussions in regional and multilateral forums. The strategy is therefore deliberately flexible, to pick up opportunities for Australian business wherever they arise.

The Government has established a Market Development Task Force aimed at coordinating government activity to target realistic priority markets for access, trade promotion and trade development.

Some examples of the good results emerge we have seen emerge:

. Taiwan: opening to Australian-built cars next year, a 40 per cent cut in tariff discrimination on Australian beef, doubled quota access for Australian apples and first-time access for stone and citrus fruits.

. The Gulf States: substantial progress in marketing Australian education services.

. Thailand: several consortia involving Australian interests selected to participate in the Independent Power Producer Program.

- The National Australia Bank was awarded a Bangkok International Banking Facility licence in December 1996.

. India: a memorandum of understanding signed on air services issues - leading to an increase in the number and capacity of Australian airlines operating the route.

This year we look to build on this positive start.

A related initiative is the Prime Minister's Supermarket to Asia Council which works closely with the $13-14 billion per year food processing export industry to address impediments to growth, both domestically and in particular export markets.

At the regional level, the recent APEC Trade Ministers meeting in Montreal gave additional political impetus to the APEC economies' progress towards free trade in the region. Ministers decided to push ahead quickly in identifying priority sectors for early liberalisation.

I might also add that Ministers decided that promoting the benefits of trade liberalisation throughout APEC would be very valuable. It seems that concerns about trade liberalisation concessions not being sufficiently reciprocated around the region are not unique to Australian businesses feeling the pinch.

The Government also continues to pursue strongly Australia's trading interests in the World Trade Organization or WTO. This year the conclusion of the Information Technology Agreement and the WTO telecommunications agreement have already brought substantial gains for Australian access to international markets.

Moreover I have just returned from two important meetings overseas which had major implications for ongoing WTO discussions.

First I attended the OECD Ministerial Council Meeting in Paris and then chaired the Cairns Group Ministerial meeting of agricultural trading nations in Rio de Janeiro.

The OECD Ministerial Meeting produced a strong, forward looking statement on the need to further strengthen the multilateral trading system.

Also, as a result of an Australian initiative, the OECD will undertake a multidisciplinary study on the benefits of trade liberalisation which we expect will be a significant input for the 1998 WTO Ministerial Meeting.

I also welcomed at the OECD, the call by Sir Leon Brittan, Vice-President of the European Commission, for momentum towards a new, millennium round of multilateral trade negotiations.

Cairns Group Ministers , who played such a vital role in getting agriculture into the Uruguay Round and now as a key component of the WTO agenda, sent a clear message to major agricultural subsidisers and protectionists that the Group expects to see the next WTO negotiations deliver fundamental reform, and once and for all put agriculture and food products on the same footing as other areas of world trade.

Conclusion

Let me now conclude. I began today by saying that one of our fundamental foreign and trade policy objectives was to improve the economic well-being of all Australians.

This government is achieving that objective by building our exporting capacity. Because greater exports means more jobs for Australians.

It is a task we are tackling on two fronts.

First, we are getting our economic fundamentals right to ensure Australian firms are competitive on the international stage.

Second, we are protecting and defending Australia's economic and trade interests through our integrated trade policies which address market access issues in a number of forums.

Many Australian businesses represented here are already active participants in international markets. From your own experiences you will be well aware of the challenges of participation in the global market place and the opportunities that lie within our grasp.

The drive towards internationalisation and globally integrated production will forge ahead relentlessly. The choice for Australia is the extent to which we participate in a wealth generation process of global proportions.

Competitiveness at home and market access abroad will be critical if we are to continue to be successful in building exports and jobs for Australia.